Haim Romano 311.
(photo credit: Courtesy)
El Al Israel Airlines Ltd. controlling shareholder Israel Borovich has resigned
from the company’s board of directors Thursday following a severe rebuke by the
Israel Securities Authority over the exorbitant bonuses granted to former CEO
Romano took up his post in February 2005. His bonus
mechanism was based on the airline's net profit. However, a month later,
Romano's mechanism was changed to base the bonus on the earnings before
interest, taxes, depreciation and amortization (EBITDA), without the board's
The revised mechanism resulted in Romano receiving bonuses even
in years when El Al posted net losses.
The Securities Authority
investigation found that, as a result of the EBITDA-based mechanism, Romano
received $4.7 million more in bonuses than he should have - $5.5 million instead
of $800,000 in 2005-09.
The Securities Authority findings are summarized
in a report which details its demands of El Al, Romano, and Borovich. El Al will
be fined NIS 1.5 million.
After reviewing the report, El Al decided that
Romano and the directors' insurance company should repay the airline $1 million,
so that most of the excess bonus was approved retroactively.
report, the Securities Authority said that changing the bonus mechanism for
Romano from being based on the airline's net profit to its EBITDA was “never
discussed or legally approved by the company.”
submitted his resignation from El Al's board.
“The company will adopt an
internal enforcement plan” for reviewing changes in bonus mechanism, El Al said
in a statement, adding that it has appointed Prof. Assaf Hamdani and Adv. Moran
Meiri to prepare a proposal for this plan.
El Al's share price fell 2.2%
by mid-afternoon Thursday to NIS 1.27, giving a market cap of NIS 648 million.